When the mafia extorts money from you to allow you to live, they call it "protection money." When the government does it, they call it "consumer protection." Either way, you are paying for protection from someone who has the power to take everything you have.

Monday, January 3, 2011

If You Live in Texas Read This

Just before Thanksgiving, I was asked by a client of mine for whom I have done a lot of work to refinance his second home in La Grange, Texas for a lower interest rate. Although I expressed some concern to this borrower that he already had a low interest rate, and that going from a fifteen year mortgage to a thirty year one might not be to his best advantage, he explained that he really wanted a lower monthly payment. Since I have financed this ranch style home on twenty acres twice before, I was not at all concerned about the property or about the borrower qualifying.

Fast forward about one month. We have an approved appraisal for more than we needed. Our income and assets have all been verified. We are on our way to the closing department. We have arranged a courtesy close with a title company in El Paso so that he does not have to travel back to La Grange to close. Then, two days before we are scheduled to close, I get an email and a phone call from the lender, Suntrust, and the lender's attorney. The second home on twenty acres in Fayette County has an agricultural exemption on it to reduce the property taxes. This will have to be removed before the loan can close.

I was horrified. Because of Texas Equity laws and homestead laws, I am well aware that a property with an agricultural exemption cannot get a cash out refinance. However, our transaction was a rate and term refinance--not a cash out. The agricultural exemption has never been an issue on a rate and term refinance.

It turns out that Texas is now enforcing a statute that prevents title companies from issuing a particular title endorsement (T30 coverage) on properties with agricultural exemptions. The lender requires the T30 endorsement for the loan, but the title company will not issue the endorsement as long as the property has an agricultural exemption.

I spoke to the branch manager at Suntrust, and to both the title company in La Grange and the title company doing the courtesy close in El Paso. Apparently, this issue has become a widespread problem. Professionals buy "gentlemen's ranches" to relax from their stressful jobs. To reduce the property taxes, they file an agricultural exemption on the property which greatly reduces the property taxes. But if they want to refinance those properties, they have to remove the exemption. In El Paso county, this would have been a huge problem, because properties with agricultural exemptions are subject to three years of rollback taxes when the exemption is removed. That means that if the property is worth $200,000, and the assessed rate without the exemption would be $5084, the owner has to pay three years of taxes, or $15240.00 as the penalty for removing the exemption. In most cases, that is a deal breaker.

Fortunately, Fayette County does not charge rollback taxes if the property remains agricultural. So, while my borrower had to pay the $2000.00 difference between the exempt and the non-exempt taxes, that is all he had to pay. In El Paso, he would have had to pay three times that amount.

The title officer told me that this new rule regarding agricultural exemptions applies to purchases also. The exemption has to be removed before the transaction can close and either the buyer or the seller has to escrow for the back taxes on the property.

So before you get too far into your transactions in 2011, check out the exemptions on the property taxes. Knowing what exemptions are in place and how much it will cost to remove them can save you and your clients a lot of stress and headaches in the new year.

This is an excellent question. The title company will tell you that the exemption has to stay off for the life of the loan. However, as the president of one lender explained to me, "They are not going to follow you around for the rest of your life checking to see if you have renewed the Ag exemption." Basically, as I understand it, if you put it back on after a year there really isn't anything anybody can do about it. But if, you ever have to sell or refinance the property you will have to go through this process all over again.

Is it possible to resurvey the property into two separate parcels (i.e., the house and one acre without an AG exemption; and the rest of the nine acres kept for AG use)? How would that affect a future sale of the full ten acres? Would a refi with cash out on only the house and one acre then be possible?

Not as far as I know. If the AG exemption comes off, the tax structure changes. You probably need to ask your specific county tax office if the property can be surveyed out and the AG removed since state law does prohibit a cash-out refinance (Texas A6 loan) on a residential homestead with an AG exemption.

If you need a loan to start up business or to pay your bills and a corporate financial for real estate and any kinds of business financing. I also offer Loans to individuals, Firms and corporate bodies at low interest rate. Mortgage Companies Houston tx

If you need a loan to start up business or to pay your bills and a corporate financial for real estate and any kinds of business financing. I also offer Loans to individuals, Firms and corporate bodies at low interest rate. Mortgage Companies Houston txMortgage Calculator Houston

Summit lender Organization is a California home mortgage lender in devoted to new mortgage lenders california and mortgage refinance. While a direct mortgage company we have loan programs and options not available to traditional mortgage brokerages. Whether a first time home buyer needing a California FHA home loan, an US military veteran of the industry needing a California VA home loan, or buying a traditional mortgage

Facebook Badge

Followers

Frontier 2000 Media Group

About Me

In 1986, Alexandra Swann graduated at fifteen years of age with a bachelor’s degree in liberal arts from Brigham Young University and a GPA of 3.85. The following year, when she was sixteen, she received a Master’s Degree in History from California State University. After graduation, she taught history and English as a second language for four years at El Paso Community College. In 1989, her book, No Regrets: How Homeschooling Earned Me a Master's Degree at Age Sixteen, was published, in which she details her experiences with homeschooling. In 1993, the Swann Family was featured in the CBS Television Series, “How’d They Do That?”They were the subject of articles in The National Enquirer and Woman’s World, and were featured on Paul Harvey’s radio broadcast.

For fifteen years, from 1998- 2013, Alexandra was self-employed in the financial services industry in El Paso, Texas. As a small business owner who was active in the community and on various civic boards, she learned first-hand the challenges that excessive regulations create for small businesses. In 2012 she received the SBA’s Regional Minority Small Business Champion of the Year award.

In 2010, Alexandra and her mother incorporated Frontier 2000 Media Group to produce clean, wholesome, inspirational entertainment for families.She re-released No Regrets with a new foreword to the twentieth anniversary edition of the book updating readers on what her family is doing today. She is also co-author of four novels including The Fourth Kingdomwhich was selected as one of four finalists in the Christianity Today 2011 Christian Fiction Book Awards. Her solo novel, The Planner about the dangerous consequences of progressive big government and Agenda 21, was released in June of 2012. For more information visit her website at http://www.frontier2000.net